Question: 1. (a) Use the following information provided here below to answer the questions that follow (5 points): CURRENCY 90-DAY FORWARD RATE SPOT RATE THAT

1. (a) Use the following information provided here below to answer the questions that follow (5 points): CURRENCY 90-DAY FORWARD RATE SPOT RATE THAT OCCURRED 90 DAYS LATER Canadian dollar Japanese yen $0.86 $0.014 $0.89 $0.012 Assuming the forward rate was used to forecast the future spot rate, determine whether the Canadian dollar or the Japanese yen was forecasted with more accuracy, based on the absolute forecast error as a percentage of the realized value. (b) Assume that the four-year annualized interest rate in the United States is 11 percent and the four-year annualized interest rate in Singapore is 8 percent. Assume interest rate parity holds for a four-year horizon. Assume that the spot rate of the Singapore dollar is $0.82. (i) If the forward rate is used to forecast exchange rates, what will be the forecast for the Singapore dollar's spot rate in four years? (3 points). (ii) What percentage appreciation or depreciation does this forecast imply over the four-year period? (2 points).

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